I move:
That Seanad Éireann calls on the Minister for Enterprise, Trade and Employment to carry out a review of the operation of the Restrictive Practices (Groceries) Order, 1987, with particular reference to its effectiveness in eliminating the practice of below cost selling and the practice by some supermarket chains of absorbing VAT in order to gain competitive advantage.
The principle of reviewing legislation is important. The Minister for Enterprise, Trade and Employment and the Minister of State have at all times accepted that fact in legislation they have brought before the House, and they have often outlined the ways in which legislation and its implementation would be reviewed. It is important as a matter of principle that the effectiveness of legislation is reviewed to ensure it continues to perform the task for which it was enacted.
The Restrictive Practices (Groceries) Order, 1987, covers all goods with the exception of fresh fruit and vegetables, fresh and frozen meat and fish, intoxicating liquor and other household goods ordinarily sold in grocery shops. The order prohibits practices such as below cost selling and "hello" money and provides for controls on terms and conditions of supply. I will deal in detail with those later.
It was intended that the Restrictive Practices Act and its associated orders would be revoked when the Competition Act, 1991, came into effect. However, the only element of the restrictive practices legislation which was retained was the groceries order following lobbying from the retail grocery sector and the industry. The groceries order is considered controversial and there are two differing views on it. One is that it is harmful to consumers by restricting competition and that it has been set up to deal with a problem which does not exist. The opposite view is that it has protected small retailers and corner shops and has not allowed the dominance of the market by the large multiple chain stores. I can see value in both arguments.
Small retailers and corner shops are invaluable in terms of their contribution to society. The convenience and flexibility of running to a shop around the corner two or three minutes from the house to buy a pint of milk or loaf of bread or something else which has run out is invaluable. The fact that one does not have to queue at a checkout for five or ten minutes is often invaluable, especially as we get busier – we often run in for milk or bread in the morning before the children go to school or late at night to prepare lunches for the next day.
The corner shop is a valuable part of the community. It is where many people go on Sunday after Mass to pick up the newspapers and catch up on the local weekly gossip. People often go there to buy their lottery tickets. People see the local shop as a centre for the community. One of the faults found with newer housing estates is that there is no local centre where people can congregate and communicate. The corner shop is a vital part of the fabric of society. It also affords an opportunity for people to become self-employed by setting up small businesses. It is an economic necessity in terms of the employment it provides and the flexibility and service it gives to people who shop there. It is a vital component in society and also for competition in the trade. It keeps the larger retailers on their toes.
I referred earlier to the functions of the groceries order. There is a ban on below cost selling, which is the sale of groceries below the net invoice price. There is ban on "hello" money, which is the payment to a retailer by a supplier for stocking the supplier's good. Suppliers must also maintain published terms and conditions of supply and maintain a register of supplementary terms. Retailers may not receive any benefit from a supplier for advertising the supplier's goods and retailers must pay their suppliers on time in compliance with the supplier's published terms of credit. A supplier cannot discriminate for or against any retailer in the terms and conditions under which goods are supplied and a supplier cannot attempt to coerce a retailer in any way by threatening to withhold supplies or by any form of discrimination.
I wish to touch on a number of those points. I do not intend to discuss the issue of "hello" money. It is under investigation by the Director of Consumer Affairs. If the Director of Consumer Affairs or a tribunal, for example, is asked to conduct an investigation, they should be let do their work. We need to be wary of the area of net invoice price and below cost selling. Since the takeover of the Quinnsworth chain by Tesco, much of the distribution is imported directly from the UK. It is possible for large multiples with a base outside of the State to set the invoice price outside of the State. Then the organisation may import those goods for a price which would be below the price which would be put on the invoice in this country. That is something of which we need to be wary. No doubt the Department and the director will be keeping that in mind.
One other vitally important aspect of the groceries order is the fact that large purchasers must adhere to the published credit terms of small businesses and suppliers. Anybody who runs a business knows that cashflow is one of the most vital issues. One can be making a great deal of money in terms of profit but one's business will not be able to survive if the cashflow is not properly managed and if one's creditors are too large.
There have been a number of complaints under the groceries order but few have ended up in court. There have also been complaints recently about the practice of selling three for the price of two in some of the larger supermarket chains. While that may have something to do with low cost selling, it is also important to remember that the rights of the consumer are at stake. Often a consumer chooses to go to a large supermarket to get value for money. It is vitally important to maintain competition and not to take away the opportunity for consumers to buy their weekly or monthly groceries at a fair and competitive price.
The order was last reviewed in 1994 and 1995 and it has continued in existence since then. However, in 1996 the Competitions and Mergers Review Group was set up and it is currently reviewing the position of the groceries order as part of its work. Its terms of reference are to review and make recommendations on a number of areas, and it will be reporting back to the Minister later this year.
The group is also reviewing the effectiveness of the Competition Acts, 1991 and 1996, including the structures and methods of applications. The group is also reviewing the position of the Restrictive Practices (Groceries) Order, 1987, particularly the below cost aspects of the order, and it will make the appropriate recommendations for the future.
The reason for the motion is to focus attention on the importance of the review of this legislation, highlighting the importance of making sure there is not another price war in below cost selling and the practice of selling VAT free goods does not start in Ireland, particularly following the big change where many of the UK multiple stores entered the Irish market. Our purpose in tabling this motion is to ensure the protection of the jobs of the people working for suppliers and supermarkets in the industry in Ireland, to protect the rights of consumers and to ensure, where possible, that any savings which can be made through national distribution and large stores will be passed on to the consumer, but not to the extent that they will force smaller organisations and shops out of business.
Competition is vital in this business. The culture of allowing enterpreneurs and small shopkeepers to open up and maintain businesses is also vital, as is the availablity of choice to all consumers. Between these three concepts lies the answer to what is necessary to make sure that this important trade is regulated and nobody loses out. I thank the Minister of State, Deputy Treacy, for coming this evening to hear the debate and look forward to what he and the Members have to say.